liwwa is a crowd investment platform born in the Middle East. The service was created by two Palestinian entrepreneurs, Ahmed Moor and Samer Atiani, who “decided to develop a way to use the power of the internet to work on the chronic unemployment and underdevelopment problems.” The platform is not your run of the mill crowd funding platform: It is Sharia-compliant, the first of its kind that pays investors a return on a regular basis based on a lease-to-own structure. This means that there is no equity or interest in the equation.
Ahmed graduated from the University of Pennsylvania in 2006 with a degree in Political Science and Psychology. He spent three years structuring cat bonds in New York before moving to Beirut where he worked as a journalist with The Guardian, Al Jazeera and a few other outlets. After covering the Egyptian revolution for Al Jazeera, he started a Master’s in Public Policy at Harvard University. He founded liwwa, Inc. when he was still a student at Harvard. He graduated in May.
Samer meanwhile graduated from Guilford College in North Carolina with a degree in Physics and a minor in Economics in 2006. He spent a couple of years researching and building radio telescopes before he pivoted into Educational Technology in New York, where he worked as a professional software developer building assessment and reporting systems used by millions of students across the USA. After that he became a software engineer at Etsy for two years where he helped build marketplaces for handmade goods from around the world. He left Etsy in June 2013 and co-founded liwwa together with Ahmed.
The two initially met at a dinner party. Both were passionate about individual and community empowerment, particularly within the context of the Israeli occupation. The seeds for liwwa were planted in Ahmed’s mind while he was interviewing Nobel Prize-winning economist Joe Stiglitz. He told Ahmed that if Egypt didn’t manage to create opportunity for all the young people in the country, there would be some serious problems in the future.
Later in November, the two decided to work together. Given their backgrounds, it seemed natural for them to work on development and empowerment in MENA.
“The SME sector has a huge capital access problem, so that’s where we decided to target our efforts. And after a few months of working hard at it we came up with our unique crowd funding structure. So, liwwa really emerged from our mutual experience as Palestinians and as young Arabs in an Arab world that desperately needs more opportunity.”
Simply put, liwwa is a peer-to-peer investment platform focused on small businesses in conformity with Islamic financial regulations. The service connects businesses in need of capital to people who want to invest. Investors earn returns on their investments while beneficiaries are able to fund what they need for their businesses quickly and inexpensively.
How Does It Work?
So if small business owners need certain assets to grow – like a delivery vehicle, a new pizza oven, etc – they can raise the money from the crowd, through liwwa, that buys the assets for them. First, the owner creates a liwwa profile. Investors then pool their capital and purchase the asset on their behalf. As a final step, the beneficiaries repay the principal amount and share some of the profits in monthly payments to the investors until they own the asset.
“The transaction structure is fully Sharia-compliant because the capital exchange occurs around an asset. And the profit rate that investors receive is like the profit rate that any merchant receives when they buy a wholesale good and sell it to you in the store,” explains Ahmed. “And for investors, they know exactly how much they’re getting in return and when. They can model the returns on their investments. In that sense liwwa is more like a bond than a stock investment.”
liwwa incurs a 2% account service fee from investors for every repayment a small business makes. So if the funded asset is worth $1100, and the investee has to repay the amount over 6 monthly payments, plus 100 in profit, this will translate into six $200 payments. liwwa collects 2% of that amount, or $4, every months.
“It was important to us that we align our incentives with those of our investors so we only generate revenue as small businesses make the monthly lease payments on the assets we’ve helped fund.”
Crowd vs Traditional Investment
Traditional investment brings more than money to the table. Investors bring along their expertise and experience. This is not the case with crowdfunding, but its not a shortcoming for liwwa users either.
For liwwa’s clients, and the majority of small businesses as well, the problem lies in the lack of capital, not the lack of know-how according to Ahmed. “Think of a guy with a thriving flower delivery business. He may be profitable but he still needs money to buy a second delivery vehicle. He knows his business, but the bank isn’t lending him the $2,000 or $3,000 he needs to just execute. Well, that’s something he should be able to do through liwwa.com ”
In fact liwwa offers some advantages over the traditional investment model. Small business owners benefit from a lower cost of capital. For investors, it provides alternative revenue streams.